Moneytree CPO calls out lack of Open Banking Progress

In a blog post dated February 18, 2020, Moneytree Chief Platform Officer Mark Makdad has called out the slow progress in Open Banking in Japan. As we have previously reported in “Japan FSA concerned: Open Banking not progressing as expected”, the number of commercial agreements in place between banks and registered payment service providers has been quite low.

At the end of September, MoneyForward was in the lead, with 35 commercial contracts signed, followed by Zaim and Moneytree, each in the lower 20s. In his post, Mark quotes 34 financial institutions (as of February 2020) that have signed a bank API usage agreement with Moneytree, so progress has been made, however, this compares to 130 banks monitored by the FSA in the September survey (for those who are counting, that is about 26%). At the end of September, 73 banks had made zero progress, while Mark quotes 90% of banks with at least one agreement in place at the end of November.

Under the revised Banking Law, financial institutions were obliged to implement Open APIs by May 2020. Seeing little progress, and following an emergency meeting with the industry in November, the Financial Services Agency (FSA) decided in December 2019 to permit agreements for screen scraping. As a result, the pressure to implement Open APIs has gone, and there will be virtually no deadline in the foreseeable future. Mark is challenging this status and openly wondering why the industry cannot to better.

Mark points out three key benefits of an API architecture

• Business efficiency, as the APIs do not only service external, but also internal connectivity — the associated changes in the architecture from a monolithic to a much more modular design generally help financial situations leverage their data better themselves, and drives down the cost of future system changes while increasing business agility
• User protection, as a well-designed and permissioned API architecture protects against unauthorized data access and prevents unintentional customer data exposure
• Open innovation, through the combination of the data owned by the financial institutions with data from other service providers and even competitors, allowing for the development of entirely new business propositions

Of course, Mark’s point is that Moneytree has eight years of experience in data aggregation in the financial industry, and has a deep knowledge of banking APIs. They have undergone several external audits, and are registered as an electronic payments service provider. Some of their clients have gone from contract signing to API implementation within three months — so while that might be a best-case scenario, should the whole industry just be allowed to block Open Banking on the grounds that it is too difficult?

Mark himself has been involved in the Open API & Open Banking discussions since Day 1, through being a founding member of the Fintech Association of Japan and chairing the corresponding subcommittee, as he also explains in this recent YouTube video.

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